Section 160 Cryptocurrency Tax In Canada: CRA Rules For Related-Party Crypto Transfers

Overview: Section 160 of the Income Tax Act and the Derivative Tax Trap for Canadian Crypto Investors

Section 160 of Canada’s Income Tax Act is among the most powerful — and most feared — collection tools in the CRA’s arsenal. Unlike ordinary tax assessments, Section 160 can reach beyond the person who earned the income and impose derivative liability on an entirely separate taxpayer: the recipient of a transfer. In the context of cryptocurrency, that mechanism transforms what might appear to be a routine wallet-to-wallet movement or a generous family gift into a potentially devastating tax obligation attached to the transferee.

For Canadian crypto investors, entrepreneurs, and high-net-worth families engaged in crypto tax planning, Section 160 creates risks that are far broader than the traditional real estate or corporate context in which it most commonly arose. The sheer portability of digital assets — Bitcoin transferred between wallets in seconds, NFTs moved into family trusts without documentation, DeFi tokens distributed informally among related parties — means that Section 160 exposure can accumulate rapidly and invisibly.

This article has been comprehensively updated to reflect recent case law — including Eyeball Networks Inc. v. Canada, 2021 FCA 17, Vasilkioti v. The King, 2024 TCC 101, and Mignardi v. The Queen, 2013 TCC 67 — and the new subsection 160(8) anti-avoidance rule introduced by the Budget 2025 Implementation Act, effective November 4, 2025. It covers the statutory four-element test, the critical subsequent-assessment trap, CRA blockchain analytics enforcement, worked FMV examples, and practical risk-mitigation strategy for Canadian crypto investors.

“Section 160 is not concerned with intent — it is concerned with the movement of value. In the crypto space, that means every wallet transfer between related parties must be treated with the same caution as a formal asset transfer. An experienced Canadian crypto tax lawyer can help you structure your affairs to avoid inadvertent derivative liability.”

— David J. Rotfleisch, Certified Specialist in Taxation (Law Society of Ontario), Rotfleisch & Samulovitch P.C.

Section 160 of the Income Tax Act: Statutory Framework

Section 160 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), imposes joint and several liability on a transferee who receives property from a tax debtor in a non-arm’s length transaction at less than fair market value. The statutory text reaches transfers “by any means whatever,” a formulation that courts have interpreted broadly. There is no mental element: neither the transferor’s intent to evade nor the transferee’s knowledge of the tax debt is relevant to liability.

The CRA’s authority under Section 160 runs in parallel with its ordinary collection powers. Critically, Section 160 is not limited by the normal reassessment limitation periods that govern income tax assessments under subsection 152(4). The CRA can issue a Section 160 assessment many years — even decades — after the underlying transfer occurred, provided the transferor’s tax liability existed at the time of transfer. Critically, and as discussed in detail below, the tax liability need not have been assessed at the time of the transfer — it need only have existed in respect of the relevant taxation year. A subsequent reassessment by the CRA, issued years after the transfer, that establishes or increases the transferor’s liability for a year in which the transfer occurred fully engages Section 160.

The provision operates against the transferee, not merely the transferor. Once assessed, the transferee becomes a co-debtor for the lesser of (a) the transferor’s outstanding tax debt and (b) the fair market value of the transferred property minus any consideration paid. Importantly, payment by one co-debtor reduces (but does not necessarily extinguish) the liability of the other. As the Federal Court of Appeal confirmed in Canada v. Heavyside, 1996 CanLII 3932 (FCA), even if the original tax debtor is subsequently discharged from bankruptcy and released from the underlying debt, the transferee’s derivative liability survives and remains enforceable by the CRA.

The Tax Court of Canada in Mignardi v. The Queen, 2013 TCC 67, further clarified that where the facts concerning the underlying tax debt are exclusively or peculiarly within the CRA’s knowledge, the onus shifts to the CRA to prove the existence and quantum of that debt — an important procedural protection for transferees who had no access to the tax debtor’s affairs.

Section 325 of the Excise Tax Act: The GST/HST Parallel

Section 160 of the Income Tax Act has a direct parallel in section 325 of the Excise Tax Act, which imposes the same derivative liability framework for GST/HST debts. Where a crypto trader or business operator with outstanding GST/HST obligations transfers cryptocurrency to a non-arm’s length person for less than fair market value, section 325 can make the transferee jointly and severally liable for the GST/HST debt in the same way section 160 operates for income tax debts. The two provisions can apply simultaneously to the same transfer if the transferor owes both income tax and GST/HST. Canadian crypto investors involved in commercial activity — including frequent trading, NFT sales, or DeFi yields that attract GST/HST obligations — should be aware that a single related-party transfer can engage both provisions at once.

The CRA has consistently treated cryptocurrency as property for Canadian income tax purposes. This position is confirmed in the CRA’s published guidance and in administrative rulings addressing digital assets. Tokens — including Bitcoin, Ether, stablecoins, NFTs, and DeFi governance tokens — fall within the definition of property in the Income Tax Act and are squarely captured by Section 160. In Vasilkioti v. The King, 2024 TCC 101, the Tax Court of Canada confirmed that Section 160 applies to gifts of cryptocurrency and non-fungible tokens received from a related party with outstanding tax debts, treating digital assets as property without qualification.

The consequence is direct: any transfer of cryptocurrency from a tax debtor to a non-arm’s length person for less than fair market value is potentially a Section 160 transfer. This includes wallet-to-wallet movements where the beneficial owner changes, gifts of digital assets to family members, contributions of crypto to family-controlled corporations below FMV, and distributions from crypto holding trusts.

The Tax Debt Need Not Be Assessed at the Time of Transfer: A Critical and Frequently Misunderstood Rule

One of the most dangerous misconceptions about Section 160 is the assumption that the ƒscaprovision only applies if the transferor already had an assessed tax debt at the time of the transfer. That assumption is wrong, and it has resulted in significant unexpected liability for many transferees, including crypto investors who received tokens from family members years before any CRA crypto tax audit.

The correct legal test is that the transferor must have been liable to pay tax under the Income Tax Act in respect of the taxation year in which the transfer took place — or any preceding taxation year. The tax need not have been assessed, confirmed, or even identified by the CRA at that time. As the Federal Court of Appeal held in Eyeball Networks Inc. v. Canada, 2021 FCA 17, the provision “applies whether or not the transferor or the transferee was aware of any tax liability at the time of the transfer.” In that case, the tax liability for the transferor’s 2000, 2001, and 2002 taxation years was assessed by the CRA after the relevant transfer, yet the Court confirmed that it “existed legally at the time” — and Section 160 therefore applied in full.

The practical implication is stark: a crypto investor who receives Bitcoin from a parent in 2022 may find themselves assessed under Section 160 in 2026 when the CRA issues a reassessment against the parent for unreported income in the 2022 taxation year. The fact that neither party knew of any tax liability in 2022 provides no defence. The fact that the reassessment came four years after the transfer provides no defence. The transferee’s liability is measured against whatever the transferor owed for that year as ultimately determined — including interest and penalties that have accrued since.

“The subsequent-assessment trap is the aspect of Section 160 that catches even sophisticated crypto investors off guard. You can receive Bitcoin today from a family member who, to the best of everyone’s knowledge, is fully compliant. The CRA reassesses them three years from now for unreported income in the year of the transfer, and suddenly you are facing a joint and several liability you had no reason to anticipate. As a Certified Specialist in Taxation, I advise any client receiving a significant crypto transfer from a family member to inquire about the transferor’s tax filing status as a matter of basic due diligence — even if it is an awkward conversation.”

— David J. Rotfleisch, Certified Specialist in Taxation (Law Society of Ontario), Rotfleisch & Samulovitch P.C.

How Subsequent Reassessments Interact with the Section 160 Limitation Period — and Why There Is None

The interplay between the absence of a limitation period on Section 160 assessments and the CRA’s ability to issue a reassessment of the transferor years after the transfer compounds the exposure considerably. Consider the following sequence, which is entirely possible under current Canadian tax law:

• 2021: A spouse transfers Ether worth $150,000 to the other spouse as a gift, with no consideration paid.
• 2021–2024: The transferring spouse files income tax returns that appear to reflect full income.
• 2024: The CRA audits the transferring spouse and reassesses the 2021 taxation year, adding $200,000 in unreported income from a crypto trading activity — generating a tax liability of approximately $92,000 for that year.
• 2026: The CRA issues a Section 160 assessment against the receiving spouse for $92,000 — the lesser of the transferor’s tax debt and the FMV of the Ether at transfer.
• The receiving spouse has no recourse based on: the five-year gap, their lack of knowledge of the unreported income, or the fact that the transferring spouse’s tax debt did not exist as an assessed amount when the transfer occurred.

This scenario is not hypothetical. It reflects the mechanics confirmed in Eyeball Networks Inc. v. Canada, 2021 FCA 17, and is directly applicable to cryptocurrency transfers given the CRA’s growing capacity to reassess crypto trading income years after the fact using blockchain analytics. Transferees who received crypto assets from related parties should treat the possibility of a subsequent reassessment against the transferor as a live risk, not a remote one. Consulting an experienced Canadian crypto tax lawyer before or promptly after receiving a significant crypto transfer from a non-arm’s length party is the only reliable way to understand and document the transferor’s tax position at the time.

Non-Arm’s Length Relationships in the Crypto Context

The non-arm’s length requirement of Section 160 is satisfied whenever the transferor and transferee are related persons within the meaning of subsection 251(2) of the Income Tax Act. Related persons include spouses, children, parents, siblings, and corporations controlled by the same individual or family group. The Income Tax Act deems related persons to be not dealing at arm’s length.

In the crypto context, non-arm’s length transactions most frequently arise in the following configurations: transfers from an individual to their spouse or adult children; movements of tokens between an individual and a corporation they control; contributions of crypto assets to a family trust in which the transferor retains an interest; and distributions by a corporation to a controlling shareholder that are characterized as loans or advances rather than dividends. Each of these structures is susceptible to Section 160 reassessment if the transferor had an outstanding tax liability.

The arm’s length test under subsection 251(1) also encompasses persons who, while not related by blood or corporate control, are not dealing at arm’s length in fact — for example, close business associates whose relationship effectively removes the independence of negotiation. In crypto markets, informal arrangements between friends or partners who co-invest and transfer assets back and forth may satisfy this factual non-arm’s length test even absent a formal relationship.

“Related-party crypto transactions are the highest-risk category for Section 160 exposure. The informality of blockchain transfers — especially between spouses and children — creates a perfect storm: no documentation, no FMV analysis, and no awareness that liability has been transferred along with the tokens. As a Certified Specialist in Taxation, I have seen these situations arise years after the original transfer when a CRA audit identifies the transferor as a tax debtor.”

— David J. Rotfleisch, Rotfleisch & Samulovitch P.C.

The Fair Market Value Problem: Crypto Volatility and Section 160 Valuations

One of the most challenging aspects of Section 160 in the crypto context is the fair market value determination. Under the provision, the transferee’s maximum liability is the FMV of the transferred property at the time of transfer, less any consideration paid. Because cryptocurrency values fluctuate dramatically — Bitcoin alone has ranged from under $10,000 to over $100,000 CAD within a single market cycle — the FMV determination can be highly contentious.

Where the transfer occurred years ago, the taxpayer may face practical difficulty reconstructing the FMV. Exchange records may be unavailable, wallets may have been lost or migrated, and token prices at historical timestamps may require third-party blockchain analytics to establish. The CRA will use the highest defensible valuation at the time of transfer; it is the taxpayer’s burden to rebut this figure.

NFTs present a particularly difficult FMV problem. Unlike fungible tokens with liquid market prices, non-fungible tokens may have been transferred at a time when comparable sales data was sparse or non-existent. The CRA has not issued definitive guidance on NFT valuation methodology, meaning contested Section 160 assessments involving NFTs are likely to require expert valuation evidence.

Contemporaneous FMV documentation is therefore not merely good practice — it is essential to any defensible position in a Section 160 context. Taxpayers engaged in cryptocurrency tax planning involving related-party transfers must obtain and preserve independent valuations at the time of the transfer.

CRA Enforcement: Blockchain Analytics and the No-Limitation-Period Problem

The CRA has made substantial investments in blockchain analytics capability. Working with commercial analytics providers, the CRA can correlate blockchain addresses with taxpayer identities using exchange KYC data obtained through compulsory production orders under section 231.2 of the Income Tax Act. This capacity allows the CRA to reconstruct historical transfer chains, identify related-party movements, and determine FMV at transfer dates using exchange price data.

What makes Section 160 particularly dangerous in this environment is the absence of any limitation period, compounded by the fact that the transferor’s tax liability need not have been assessed at the time of the transfer. The CRA may issue a Section 160 assessment against a transferee at any time, provided the conditions of the provision are met. A crypto investor who received Bitcoin from a parent five years ago — when the parent was accumulating an unreported income liability that had not yet been assessed — may today receive a Section 160 notice of assessment for an obligation that did not exist as an assessed amount at the date of transfer. The Federal Court of Appeal confirmed in Eyeball Networks Inc. v. Canada, 2021 FCA 17, that Section 160 applies whether or not the transferor or transferee was aware of any tax liability at the time of transfer, and regardless of whether that liability had been assessed.

This problem is compounded by the fact that the CRA’s Voluntary Disclosures Program under IC00-1R7 (revised October 2025) does not automatically protect transferees who receive cryptocurrency from a disclosing taxpayer. The VDP is the disclosing taxpayer’s remedy — not the transferee’s. A transferee who wishes to address their own Section 160 exposure through the VDP must make their own separate application, which may or may not be accepted depending on the circumstances.

R. v. Jarvis and the Civil/Criminal Divide in Crypto Tax Audits

The Supreme Court of Canada’s decision in R. v. Jarvis, 2002 SCC 73, established a critical distinction between the CRA’s civil audit powers and its investigative powers in the criminal context. The Court held that once the predominant purpose of a CRA inquiry shifts from tax compliance verification to the determination of penal liability — including criminal prosecution for tax evasion under section 239 of the Income Tax Act — the full panoply of Charter rights is engaged.

In the crypto context, a Section 160 audit of a transferee may begin as a civil collection matter and evolve into a criminal investigation if the CRA determines that the transfers were designed to conceal assets from tax authorities. The Jarvis distinction then becomes critical: evidence obtained through audit powers after the inquiry becomes predominantly penal may be excluded under section 24(2) of the Canadian Charter of Rights and Freedoms.

An experienced Canadian tax litigation lawyer for CRA disputes will assess whether the CRA has improperly used its civil audit powers to gather evidence for a criminal investigation, whether the Jarvis threshold has been crossed, and whether exclusionary relief is available. In crypto cases involving large-scale related-party transfers, criminal referral is a genuine risk that must be anticipated from the outset of any audit.

“The Jarvis line can be crossed quietly in a crypto audit. By the time a taxpayer realizes that the CRA has shifted from verification to investigation, significant statements may already have been made without the protection of counsel. I always advise crypto clients facing a Section 160 inquiry to retain an experienced Canadian tax litigation lawyer before responding to any CRA questionnaire or information request.”

— David J. Rotfleisch, Certified Specialist in Taxation (Law Society of Ontario)

High-Risk Crypto Scenarios for Section 160 Assessment

The following categories of crypto transaction present the highest Section 160 exposure for Canadian taxpayers:

The scenario of parking crypto assets with a related party during a period of financial distress or active CRA dispute deserves special emphasis. Courts and the CRA treat this pattern as paradigmatic Section 160 avoidance. Livingston v. The Queen, 2008 FCA 89, confirmed that Section 160 is engaged even where the transfer was motivated by legitimate non-tax reasons, provided the statutory elements are met. In the context of crypto assets — which are easily moved and difficult for creditors to identify — this warning cannot be overstated.

Taxpayers with outstanding CRA obligations who are contemplating any cryptocurrency transaction involving a related party should obtain legal advice before executing the transfer. The consequences of inadvertent Section 160 exposure — particularly given the absence of any limitation period — can far exceed the value of the transferred asset.

Interaction with Other Provisions: Section 69, Attribution Rules, and the GAAR

Section 160 does not operate in isolation. In related-party crypto transactions, several other provisions of the Income Tax Act may apply concurrently or in sequence:

• Section 69 — Deemed Proceeds: Where property is transferred below FMV, section 69 may deem the transferor to have received FMV as proceeds, triggering a capital gain on the crypto disposal that increases the tax debt for Section 160 purposes.
• Attribution Rules (ss. 74.1–74.5) — Where crypto income or gains generated by transferred property are attributed back to the transferor, the amount of the underlying tax liability for Section 160 purposes may be higher than expected.
• Section 75(2) — Trust Attribution: Where crypto assets are transferred to a reversionary family trust, income and capital gains may be attributed back to the transferor, compounding the section 160 risk.
• General Anti-Avoidance Rule (s. 245) — If a related-party crypto transfer is part of a series of transactions designed to avoid Section 160, the GAAR may apply to re-characterize the transaction, overriding any planning that was otherwise technically compliant.

This multi-provision overlay means that comprehensive legal analysis is required before any significant related-party crypto transaction is executed. The interaction between Section 160 exposure, capital gains triggered by section 69, and attribution under the spousal and corporate attribution rules can produce tax consequences far in excess of what a simple FMV analysis would suggest. See our detailed discussion of Canadian crypto tax rules for a broader overview of how the Income Tax Act applies to digital assets.

New Subsection 160(8): The Budget 2025 Anti-Avoidance Amendment and Its Impact on Crypto Transfer Planning

Effective for taxation years beginning on or after November 4, 2025, the Budget 2025 Implementation Act (S.C. 2026, c. 3) introduced a new anti-avoidance rule in subsection 160(8) of the Income Tax Act. This amendment targets what the Department of Finance described as “section 160 avoidance planning” — structured transactions where taxpayers used nominal or partial consideration to limit a transferee’s derivative liability under Section 160 while effectively sheltering the transferred property from CRA collection.

Under the pre-amendment case law, courts had held that where a planner retained a fee as part of a section 160 arrangement, that fee amount did not attract joint and several liability — even where the overarching purpose of the transaction was to reduce the transferee’s exposure. New subsection 160(8) eliminates this result. Where a transaction or series of transactions constitutes a “section 160 avoidance transaction” — meaning that one of the purposes of the transaction was to avoid the joint and several liability of the transferee and the transferor — the consideration given by the transferee is

deemed to be nil for the purpose of calculating derivative liability. In practical terms: if the CRA can establish that avoiding Section 160 liability was one purpose (not necessarily the dominant purpose) of the transfer, the transferee’s entire consideration is treated as worthless, maximizing the assessed liability to the full amount of the transferor’s outstanding tax debt.

Why Subsection 160(8) Matters Specifically for Crypto Transfers

The crypto context amplifies the significance of subsection 160(8) for two reasons. First, the informality and speed of blockchain transfers means that crypto assets are disproportionately used in Section 160 avoidance arrangements — precisely the pattern the new provision targets. Second, the “one of the purposes” standard is a low threshold. A taxpayer who transfers Bitcoin to a spouse with nominal consideration during a CRA audit, even if the transfer also serves legitimate family financial reasons, risks having the avoidance purpose attributed to the transaction.

Under subsection 160(8), any planning strategy that previously relied on structuring consideration to cap derivative liability must now be re-evaluated entirely. The provision is not limited to abusive tax shelters; it applies to any transfer where the CRA can point to avoidance of joint and several liability as a purpose. For crypto investors with related-party transfer arrangements entered into on or after November 4, 2025, independent legal analysis of the new provision is essential before any non-arm’s length transaction is executed. Contact an experienced Canadian crypto tax lawyer to assess whether your existing or planned crypto transfer arrangements are affected by the new subsection 160(8).

“Subsection 160(8) changes the calculus entirely for any crypto transfer planning that relied on consideration structuring to manage derivative liability. As a Certified Specialist in Taxation, I am seeing this provision for the first time in client files involving post-November 2025 transfers, and its one-of-the-purposes standard is broad enough to capture a wide range of arrangements that taxpayers may have assumed were compliant. This is not a provision that can be planned around after the fact.”

— David J. Rotfleisch, Certified Specialist in Taxation (Law Society of Ontario), Rotfleisch & Samulovitch P.C.

Pro Tax Tips: Managing and Mitigating Section 160 Exposure in Crypto Transactions

From a strategic standpoint, the following practices are essential for any Canadian crypto investor or entrepreneur engaged in related-party transactions:

• Document fair market value at the time of every transfer. Use exchange pricing data, independent appraisals for NFTs, and retain all records indefinitely.
• Ensure genuine consideration is paid for any non-arm’s length crypto transfer. FMV consideration eliminates Section 160 exposure; however, following the new subsection 160(8), nominal consideration that was previously used to cap derivative liability is no longer a safe strategy if one of the purposes of the transfer was avoidance of joint and several liability.
• Avoid moving crypto assets during periods of financial distress, tax disputes, or active CRA audit of any related party.
• Review the status of all non-arm’s length parties before accepting crypto transfers. If the transferor has outstanding tax obligations, transferee liability may already be engaged.
• For transfers on or after November 4, 2025, analyze whether new subsection 160(8) applies. If avoiding Section 160 liability was one purpose of the transfer, the consideration paid may be deemed nil, regardless of its actual amount.
• Retain experienced Canadian tax counsel before executing any significant related-party crypto transaction. Post-transfer remediation is far more difficult and expensive than pre-transfer planning.
• If a Section 160 assessment has already been received, act immediately. The 90-day filing deadline for a Notice of Objection under section 165 of the Income Tax Act is strict. Contact a Canadian tax litigation lawyer without delay.
• Consider whether a voluntary disclosure by the transferor party under IC00-1R7 is appropriate. While this does not automatically protect the transferee, it may reduce the underlying tax debt against which Section 160 is calculated.

“Proactive planning is the only reliable defence against Section 160 in the crypto context. Once a transfer has been made, the options narrow considerably. The absence of any limitation period means the risk never disappears — it simply waits. With the addition of subsection 160(8), even transfers that were structured with legal advice may now attract reassessment if the avoidance purpose can be established.”

— David J. Rotfleisch, Certified Specialist in Taxation (Law Society of Ontario), Rotfleisch & Samulovitch P.C.

Frequently Asked Questions About Section 160 and Cryptocurrency in Canada

Does Section 160 apply to Bitcoin, Ether, and NFTs?

Yes. The CRA treats all cryptocurrency and digital tokens as property for income tax purposes. Section 160 applies to all property transfers, and courts have consistently interpreted the provision broadly. There is no carve-out for digital assets.

Can I be liable if I received crypto as a gift from a spouse who owed taxes?

Yes. If your spouse had a tax liability at the time of the transfer and transferred cryptocurrency to you for less than fair market value (FMV), you may be jointly and severally liable for that debt up to the FMV of the transferred assets. Because a gift involves no consideration, receiving crypto as a gift can maximize your potential exposure under Section 160.

What if I had no knowledge of my family member's tax debt?

Knowledge is legally irrelevant. Section 160 is a strict liability provision. The CRA does not need to establish that the transferee knew about the transferor's tax debt. If the four statutory elements of Section 160 are met, the assessment can stand regardless of your intent or awareness.

Is there a time limit for the CRA to issue a Section 160 assessment?

No. Unlike ordinary income tax reassessments, there is no limitation period for Section 160 assessments. The CRA can issue an assessment years—or even decades—after the original transfer, provided the underlying tax liability existed for the relevant taxation year. Importantly, the tax liability does not need to have been assessed when the transfer occurred. A later reassessment of the transferor can retroactively establish the tax debt that gives rise to Section 160 liability for the transferee.

Can I be assessed under Section 160 if the transferor was not reassessed until after the transfer took place?

Yes. This is one of the most misunderstood aspects of Section 160. The provision requires only that the transferor's tax liability existed for the relevant taxation year—not that it had already been assessed by the CRA when the transfer occurred. The Federal Court of Appeal confirmed this in Eyeball Networks Inc. v. Canada, 2021 FCA 17, holding that Section 160 applies "whether or not the transferor or the transferee was aware of any tax liability at the time of the transfer." In the cryptocurrency context, this means a recipient of Bitcoin, Ether, or other digital assets may be assessed years after receiving the transfer if the CRA later reassesses the transferor for unreported crypto income relating to that taxation year.

Does moving crypto between my own wallets trigger Section 160?

No, provided beneficial ownership does not change. Transfers between cryptocurrency wallets that you wholly own and control do not involve a transfer of ownership and therefore do not engage Section 160. However, the CRA may closely examine transactions that appear to remain within the same taxpayer if blockchain records suggest that ownership may actually have changed.

What should I do if I receive a Section 160 Notice of Assessment?

You should file a Notice of Objection within 90 days of the date shown on the Notice of Assessment. Missing this deadline can significantly limit your legal options. You should also retain an experienced Canadian tax litigation lawyer as soon as possible. Successfully challenging a Section 160 assessment often requires a detailed legal analysis of the underlying transfer, the fair market value of the transferred property, and the transferor's tax liability.

Can a Voluntary Disclosures Program (VDP) application by the transferor protect me as the transferee?

Not automatically. The CRA's Voluntary Disclosures Program generally provides relief only to the taxpayer who makes the disclosure. A transferee seeking to address their own potential Section 160 liability may need to submit a separate VDP application. Because the interaction between the VDP and derivative Section 160 liability can be complex, you should obtain advice from an experienced Canadian tax lawyer.

What is new subsection 160(8), and how does it affect cryptocurrency transfer planning?

New subsection 160(8), introduced through the Budget 2025 Implementation Act and effective for taxation years beginning on or after November 4, 2025, is a targeted anti-avoidance rule. Where one of the purposes of a transfer is to avoid the joint and several liability imposed by Section 160, the consideration paid by the transferee is deemed to be nil. Previously, taxpayers sometimes attempted to limit Section 160 exposure by structuring crypto transfers with partial or nominal consideration. Subsection 160(8) largely eliminates that planning opportunity. If the CRA establishes that avoiding Section 160 liability was one purpose of the transaction—not necessarily the primary purpose—the transferee may become liable for the transferor's full tax debt. Related-party cryptocurrency transfers occurring on or after November 4, 2025 should therefore be carefully reviewed by experienced Canadian crypto tax counsel.

Does Section 160 apply to DeFi transactions involving related parties?

Yes. If a decentralized finance (DeFi) transaction transfers value from a tax debtor to a non-arm's length person for less than fair market value, Section 160 may apply regardless of whether the transfer occurred through a smart contract or a conventional blockchain transaction. The legislation's broad wording—covering transfers made "by any means whatever"—is capable of encompassing DeFi transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.